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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The lost net benefit to society caused by a movement away from the competitive market equilibrium






2. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






3. AFC = TFC/Q






4. TR = P * Qd






5. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






6. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






7. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






8. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






9. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






10. The marginal utility from consumption of more and more of that item falls over time






11. Ei > 1






12. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






13. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






14. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






15. A firm that has market power in the factor market (a wage-setter)






16. The change in quantity demanded resulting from a change in the price of one good relative to other goods






17. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






18. A good for which higher income decreases demand






19. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






20. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






21. ATC = TC/Q = AFC + AVC






22. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






23. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






24. The sum of consumer surplus and producer surplus






25. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






26. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






27. Ei = (%dQd good X)/(%d Income)






28. AVC = TVC/Q






29. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






30. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






31. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






32. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






33. MUx / Px = MUy/Py or MUx/MUy = Px/Py






34. The additional cost incurred from the consumption of the next unit of a good or a service






35. Ed = 0 - no response to price change






36. Two goods are consumer substitutes if they provide essentially the same utility to consumers






37. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






38. The additional benefit received from the consumption of the next unit of a good or service






39. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






40. The difference between total revenue and total explicit costs






41. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






42. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






43. Ed = 8 - infinite change in demand to price change






44. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






45. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






46. Ed = 1






47. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






48. The practice of selling essentially the same good to different groups of consumers at different prices






49. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






50. Ed > 1 - meaning consumers are price sensitive